Since the FCA took over regulation of CMCs on 1 April it has reviewed more than 200 CMC adverts in various media and found what it called “widespread poor-practice in CMCs”.
The FCA has introduced a number of new rules in relation to financial promotions issued by CMCs to ensure that they provide information to consumers that is fair, clear and not misleading.
These rules require CMC firms to:
• identify themselves as a claims management company prominently
• state if a claim can be made to a statutory ombudsman / compensation scheme without using a CMC and without incurring a fee
• include prominent information relating to fees and termination fees which the customer may have to pay if a firm uses the term ‘no win, no fee’ or a term with similar meaning
The regulator says the new rules are designed to help consumers make an informed choice whether to use the services of a CMC.
Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said: “Many CMCs play a significant role in helping consumers to secure compensation.
“But CMCs using misleading, unclear and unfair advertising practices to get business is completely unacceptable.
“We won’t hesitate to take action where we consider that customers are being misled or otherwise treated unfairly by poor advertising.
“Firms should also understand that we will take their compliance with our rules on financial promotions into account when considering applications for full authorisation.”
The FCA has reviewed all kinds of CMCs’ financial promotions including website pages and social media.
Examples of bad practice include that firms:
• fail to identify themselves as a claims management company
• fail to state, that the customer could make a claim to a statutory ombudsman or statutory compensation scheme, such as the Financial Ombudsman Service, without using the services of the firm, and without paying a fee
• appear to give consumers the impression that they would get a better outcome if they use the services of the CMC
• use the term ‘no win no fee’, but do not set out the fees that the customer must pay
• include only examples of case studies where the compensation provided to consumers is very high, even though the average amount received by consumers is considerably lower
• include important information in small font or in a position that is difficult to see, when it should in fact appear prominently in a promotion